Taxpayers are always very interested in the various tax credits that they can use to reduce their overall tax payments. The Earned Income Credit, commonly referred to as the EIC, is a tax credit which was established in an effort to help people who earn a low income to live as well as possible in their financial situation.

The earned income credit began in 1975. The idea was that the poor were just getting poorer with the taxes they were paying on top of a low income job. The credit gives back to taxpayers a good portion of the money that they paid in taxes throughout the year. In that way, families could keep more of what they earned.

The amount of the earned income credit has increased over the years. Those who fought for the tax credit agree that it is a better way to help people living in poverty than trying to raise the minimum wage. People that receive the tax credit sow that money back into the economies of their neighborhoods where it helps everyone.

There are three types of EIC eligible incomes. The first is money that is earned at a job. This money would include any wages earned by means of tips. If you are given a bonus by your employer, it can also be counted towards the earned income credit.

Self-employed earnings are also eligible for the earned income credit. If you own your own business but the money you earn with it is not enough to sufficiently care for your family, you may be able to receive the EIC. Any and everything your business earns can be counted.

Lastly, money made by someone under your care is considered. Teenagers have weekend and/or summer jobs. The money may not be enough for them to file a return of their own, but it is added to what their parents earn. Together, the income determines the amount of the earned income tax credit you qualify to receive.

The money that your investments earn for you is counted as income by the IRS, as is money you collect because of unemployment. These sources of income may reduce your chances of getting the earned income credit. For example, if your investments earn you more than $2,800 in one year, you are disqualified from the EIC.

Each year thousands of dollars in earned income credit go unclaimed. Filers either don’t know about the tax credit or they don’t think that they will qualify. Not having to file a return doesn’t mean that the tax credit doesn’t apply to you. Even if your income is below the amount that which is required for filing a tax return, you may still qualify for the earned income credit. Don’t sell yourself short. You could be passing up thousands of dollars that is yours under this tax credit.

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